Forex Reserves Down $3 Billion – Business Recorder
KARACHI: The country’s foreign exchange reserves fell drastically by some $3 billion in a week, mainly due to the repayment of a syndicated loan from China.
According to the weekly Foreign Reserves Report released by the State Bank of Pakistan (SBP), the total liquid foreign exchange reserves held by the country decreased by 13% and reached the $19 billion mark during the of last week. The country’s liquid foreign exchange reserves stood at $18.555 billion as of March 25, 2022 compared to $21.44 billion as of March 18, 2022, a decrease of $2.88 billion.
During the period under review, the reserves held by the SBP decreased, while the banks’ reserves showed some improvement. During the week ended March 25, 2022, SBP reserves decreased by $2.915 billion to $12.047 billion from $14.962 billion. Net foreign exchange reserves held by commercial banks stood at $6.507 billion, up $30 million in a week.
According to SBP, this decline (in SBP’s reserves) reflects the repayment of foreign debt, including the repayment of a large syndicated loan from China. However, the SBP expects this loan to be renewed as negotiations continue. “The rollover for this unionized facility is being processed and is expected shortly,” SBP added.
Repayment of China’s syndicated loan facility: SBP reserves drop massively by $2.915 billion
The Pakistani authorities have recently made a new request for the renewal of a syndicated facility to reduce the pressure on the external account and foreign exchange reserves. Foreign Minister Shah Mehmood Qureshi is currently visiting China and according to reports, China has agreed in principle to renew loan facilities for Pakistan.
The country’s foreign exchange reserves have been under pressure since the beginning of this calendar year due to massive external debt servicing. During the first months of this calendar year, the country’s total foreign exchange reserves decreased by $5.4 billion to $18.554 billion at the end of March 2022, from $24.019 billion as of December 31, 2022.
The federal government is continually making efforts and seeking several opportunities to build up depleting foreign exchange reserves. The government is trying to reschedule external debts, increase remittances, exports and foreign direct investment to keep reserves at a sustainable level.
The country’s current account deficit held steady at $545 million, down 78% during the month of February 2022, from $2.53 billion in January 2022.
SBP Governor Dr. Reza Baqir is confident that the country’s financing needs will be met with available foreign exchange reserves and financial flows.
Copyright Business Recorder, 2022